Liquidity shocks and pension fund performance: Evidence from early access

James Brugler, Minsoo Kim and Zhuo Zhong

Australian Journal of Management, 2024, vol. 49, issue 2, 170-191

Abstract: We study how expectations of fund flows causally affect fund performance by exploiting a quasi-natural experiment in the Australian pension system where an unexpected policy change temporarily allowed fund withdrawals from a prespecified date in the future. Using fractions of young members, middle-aged members, and government co-contributions for low-income earners as instrumental variables, we find an insignificant effect of expected fund outflows on performance. A potential explanation is that Australian superannuation funds preemptively engage in liquidity management in response to changes in expectations of future fund flows and this helps to limit direct and indirect costs in the rebalancing process. JEL Classification: G11, G12, G14, G23, G51

Keywords: Expectations; fund flows; fund performance; liquidity management; natural experiment; pension funds (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:sae:ausman:v:49:y:2024:i:2:p:170-191

DOI: 10.1177/03128962221127804

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